Mass adoption for cryptocurrencies in the next decade
Cryptocurrencies are heading for mass adoption in the coming decade, according to a study published on Monday by Imperial College London’s Business School.
Professor William Knottenbelt and Dr Zeynep Gurguc from Imperial College say in their introduction to the paper that they explore the challenges that cryptoassets need to overcome in order to realise their potential.
Functions of money
They point to the three main functions of money:
- as a medium of exchange
- a unit of account
- a store of value
While cryptocurrencies have successfully been used as a medium of exchange to buy goods and services, high transaction costs can be a problem.
Cryptocurrencies are used as a unit of account in their own digital ecosystem, but wider adoption would require acceptance by a wider global audience.
Store of value
The biggest problem, however, is convincing people that cryptocurrencies can represent a store of value – a difficult proposition given the current volatility of the asset class and the many hundreds of cryptocurrencies available – many of which probably won’t exist in a few years time.
“Bitcoin’s exponential growth in terms of adoption and finite supply has resulted in a lot of volatility in its value, which is currently creating a hindrance to its store of value function,” the study said.
Reputation and trust will be paramount to wider acceptance, and in this context a friendly, global regulatory environment needs to be established, the authors say.
They also highlight the need for greater understanding and accessibility of the blockchain technology that underpins cryptocurrency transactions.
Six major issues hold the key to the adoption process, the report concludes:
The report concludes: “An interesting question remains as to whether we will ever reach a point in which the value and health of cryptocurrencies, or cryptoassets in general, is no longer measured in terms of fiat money.
“The question is now to consider the steps required for cryptocurrency to make the transition to becoming a ‘real-world’ payment system.”